Currently, supply chain management is a cross-functional approach to manage the movement of raw materials into an organization, the internal processing of materials into finished goods, and the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and become more flexible, they have reduced their ownership of raw materials sources and distribution channels. Increasingly, these functions are being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity. However, traditional systems and methods of managing supply chains are inherently complex and problematic.
For example, with global trade, sellers are having products manufactured all over the world. One month products may be manufactured in a first country because of the supply and availability of certain raw materials or critical components. The next month those same products may be manufactured in a different facility in a different country because of, for example, changes in tariffs, regional conflicts, custom problems, transportation costs to move products from a manufacturer to a remote retailer, raw material shortages, quality control issues identified for a given manufacturing location, labor strikes, labor costs, etc.
Additional problems are created when individuals or entities attempt to counterfeit the goods and pass them off as authentic products in the stream of commerce. Consumers may not know whether a product is authentic or counterfeit. Consumers who accidentally purchase counterfeit goods may become upset after learning that the item is counterfeit, defective, or inferior in quality to the authentic products. Counterfeit goods may also cause consumer harm in situations such as, for example, lead paint on infant goods or ineffective pharmaceutical products. When attempting to return the counterfeit item to the manufacturer, the consumer may become frustrated if the manufacturer will not accept the return. Alternatively, if the consumer believes that that counterfeit product was authentic, the consumer may incorrectly assume that the manufacturer's quality is poor and its reputation may suffer.
Still other problems may be caused by globalization and complex supply chains. One such problem is product diversion. Often diversion is a civil contractual problem in the United States resulting from a sale outside the authorized store or class of trade for which the authentic products were intended. For instance, if a manufacturer sells authentic product to a high-end retail store, a contractual clause may prevent the retailer from diverting any excess authentic product to a low-end discount store. Oftentimes, these types of provisions are intended to protect brand or trade name reputation, which could be tarnished if the authentic products were sold in a low-end discount store. Nonetheless, if diverted product is found in a low-end discount store, it may be difficult to identify the high-end retailer from whom the authentic product was off loaded or diverted.
Yet other problems may arise even when a customer purchased authentic product and is pleased with it. For example, a customer may purchase high-quality apparel. After years of successful and pleasant use of the product, it may become damaged or worn out. The customer may then wish to purchase the same product again as a replacement. However, retailer or distributor information may not be present on the product or easily accessible. Consequently, the customer may be unable to determine from where replacement product of like or similar kind may be purchased. Similarly, the customer may not know whether associated products complementing the high quality apparel exist and, if so, from where they may be procured. Furthermore, manufacturers often have no way of knowing who the customers are who purchased the authentic products, let alone those customers who purchased the products and are pleased with them. Consequently, there is often a disconnect between manufacturers, retailers, and/or customers in view of globalization.